By Dietrich Knauth
NEW YORK (Reuters) -Revlon Inc received bankruptcy court approval to borrow $375 million on Friday, saying it would use the funds to shore up supply chain problems that would otherwise imperil the cosmetic maker’s sales during the busy Christmas season.
U.S. Bankruptcy Judge David Jones in New York approved Revlon’s proposed bankruptcy loan on an interim basis after hearing testimony that Revlon was down to $6 million in cash and struggling to fulfill retail customer orders.
Revlon chief restructuring officer Robert Caruso testified Friday that most of Revlon’s raw material vendors have stopped sending shipments, and many were demanding payment of past debts or deposits on future deliveries.
Without access to raw materials, Revlon cannot meet sales demands, leaving the company with dwindling cash to solve its supply problem, Caruso added. The company is currently able to fill 70% of customer orders without backlog or cancellations, compared to an industry standard of 90-95%, Caruso said.
“That will play a big role in how customers think about resetting store shelves for next year,” Caruso said in court. “If we are not able to get the money in and restore our supply chain and meet our customer orders, we will have a lot of harm to the business.”
In a worst-case scenario, Revlon could also face impacts into 2023, since retailers are going to be making long-term decisions about which products to stock in September, Caruso said.
Revlon has lined up $575 million in total funding for its bankruptcy case, and it will seek approval for the remaining $200 million at hearing next month.
(Reporting by Dietrich Knauth, editing by Deepa Babington and Toby Chopra)
